Copyright © 2005 by Ana Minerva Bonilla Updated: 9/8/06 17:06
THE WEEKEND MINER
Rediscovering American Mineral Resources
THOUGHTS FROM THE "OLD MINER"
The Dominance of the Lead Fire Assay
Well, last time we discussed the accuracy of assay techniques in general. I sure hope you all had a chance to read the US Bureau of Land Management (BLM) study on Platinum Group Metal (PGM) accuracy. It helps me understand why so little of these metals are found or commercially recovered in the western US today. I personally believe there are lots of PGMs in the West, especially California, Oregon, Idaho and Montana, but we have never really gone after them. I blame a lot of this on our assay techniques, most of which were designed to identify other metals, specifically Gold.
The first of these assay techniques is one of the oldest and the most highly regarded; the Lead Fire Assay. It gets its name from the process, which involves smelting the sample, which has been mixed with lead oxide or "litharge". Until electric furnaces were available, samples were literally smelted in a fire.
For years the Lead Fire Assay has been the "standard"; in fact the Canadian Stock Exchanges (Toronto and CEDEX) require findings to be proven with a Lead Fire Assay, done by a certified Canadian Assay Laboratory, before you can announce findings to the public. Obviously this is limited to securities on their Exchanges, but if the announcement is related to your disclosure requirements, as a publicly held company, or if it is related to any type of financing activity, there is not a lot of leeway around at least a confirming fire assay. Since Canadian Exchanges are "the Mother of all Mining Exchanges" this requirement has been emulated throughout the world.
There are a lot of stories related to "just how closely emulated."For the sake of foregoing some embarrassment to a friend who was involved I will not use the country's name, but this is a funny one. When I was working in the manufacturing industry, my company along with two international banks, were discussing an "Offtake Agreement"* that would support the financing of a new mining complex. The project was to be done in one of the "newer republics" that had realized development of its natural resources was a good way to create jobs and income for the country. As part of our "due diligence" we wanted to make sure that the "Body of Law" applicable to contracts and mining would protect our long-term interests. (This is a major concern if we agree on a price, and by the time the mine comes into production the Market Price is much higher, then getting delivery enforced is sometimes difficult.) The Commerce Minister proudly showed us the new Contract Law and a draft of the new Mining Laws. The Mining Laws looked familiar, and they should have. What they did was take the Canadian Mining Laws and substitute the name of their country for Canada. It looked like it had been done on a word processor with a "find and replace" function, because they got every "Canada" changed. Trouble was, the references to "Canadian" were missed.
By the way, I applaud the Canadians. I believe they have done an outstanding job in drafting their mining laws. They have stood the test of time and have served them (and the rest of the World) well. Their laws have also done a good job in protecting the investor.
But this is the quandary you get into over the Fire Assay. "It may not be perfect, but it is the best we have", is the way a friend of mine puts it, who is one of the more prominent mining attorneys in the world. "It protects the investor. We don't want good people to lose their life savings to a promoter who can find $10,000 per ton ore in anyone's back yard - if you just pay him some outrageous amount for his secret approach. There are millions of dollars tied up in worthless dirt, waiting for the next $100,000 investment to further develop the secret approach to getting the precious metals out of it." There is a lot of this in the Mining Industry. It seems that the "Lust of Lucre" overrides common sense a lot of the time.
Appendix 3D (as of January 2000), NON-FIRE ASSAY RESULTS, is a great "heads up" to not getting "taken" in these types of "deals". I will include it below, in its entirety, because I really believe it is worth reading. By the way, the term "Issuer" refers to someone or some company that wants to issue equity (stock) or debt (bonds, etc.) via the Exchange. Here it is:
1.) The veracity of precious metal assay results obtained by Issuers from foreign laboratories is a significant concern for the Exchange. The concern arises primarily due to the unreliable results produced by relatively unknown laboratories outside Canada incorrectly applying accepted industry techniques, using secret ("proprietary") or unverified techniques, or employing unqualified staff.
2.) Most analytic techniques for gold, silver and platinum group metals ("precious metals") utilize the fire assay method to separate the metal from the enclosing rock. The final precious metal determinations are made by electronic balances or other instrument techniques. These analytical methods have proven to be accurate, reliable and reproducible.
3.) Other analytic techniques are available for determining precious metal content of samples. These methods, if conducted accurately and within technical limitations, can be confirmed by the fire assay method and vice versa. Examples of such methods are atomic absorption, cyanide leaching and neutron activation. A key element of any analysis is that it be conducted by thoroughly trained personnel in a well-organized laboratory utilizing adequate controls.
4.) Certain Canadian provinces ensure high analytical standards by way of certification of assayers. Minimum education and experience levels are required to obtain certification. Similar requirements are not prevalent outside of Canada. The Exchange is aware that most American states do not have assayer certification while some states providing certification do not impose requirements comparable to those of the Canadian provinces.
5.) A few Issuers have used certain non-Canadian laboratories and reported significant precious metal values from their exploration programs. In most instances, it has been claimed that the samples are mineralogically complex and not susceptible to fire assay. In each situation of this nature, analysis of allegedly complex samples at other laboratories using fire assay and other industry accepted techniques have failed to confirm significant precious metal content. In other instances, some laboratories using industry accepted analytical techniques have yielded erroneous results because of faulty procedures and unqualified personnel.
6.) In view of the problems with non-fire assay techniques and non-Canadian laboratories, the Exchange requires that each news release, shareholder report or other public communication which includes precious metal results from an analysis by a non-Canadian laboratory, or from an analysis using any technique other than fire assay, contain the following information:
a.) the analytical method used to obtain the reported results;
b.) the name of the laboratory at which the analyses were conducted; and
c.) the results of any fire-assay check program or intention to conduct a fire assay check program at an independent laboratory. All results of a fire assay check program are to be published in a timely manner.
7.) An Issuer issuing a news release without the foregoing minimum information can be subject to a halt in trading pending clarification in another news release.
8.) The Exchange can require the Issuer to undertake a fire assay check program at a Canadian laboratory if the reported results are, in the Exchange's opinion, inconsistent with historic results from the property, the geological environment or other pertinent factors."
Now why is the "Exchange" so gun-shy? Well, BRE-X was just the tip of the iceberg. Every year hundreds of people loose large amounts of money to inept and unscrupulous promoters. Plus, there is a lot of variation and flat out error in many assays and assay techniques. Take a look at my last column on how good assays were? Go to the study and compare results - they all used the same standard samples.
Remember the only assay the really matters will be the one that you are paid by, and generally that will be a fire assay. Today you will often be told that an ICP-MS was used to determine the "pay" or precious content. Ask them how they prepared the sample to run through the ICP - most labs do it by fire assay, even today.
If the assay technique used isn't fire assay, or the results have not been confirmed by fire assay, or you cannot find a customer for your concentrates or metal that will pay you based on the assay technique (and is capable of paying you); a nice vacation or new truck might be a good alternative for the funds.
In the next column we will go through how a fire assay is performed.
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* An "Offtake Agreement" is an agreement where a good-credit company, agrees to purchase a fixed amount of material, generally of a designated quality-such as "LME (London Metal Exchange) Deliverable" at a fixed price, if a mine or company produces the material. In effect this transfers the credit risk to the buyer, while the performance risk stays with the producer or the producer's financing institution. This tool is especially useful where the mine will produce a metal without a forward market, such as molybdenum or tungsten, or the production which will be used to pay off the debt being incurred will occur at a more distant time than the current forward Market extends.